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If you’re self-employed or own a small company, buying one or more business vehicles may be a smart financial move. For some businesses, this is a no-brainer. For example, if you own a drywall business, the vehicle you use for transporting supplies and equipment is a key part of your job. But even if you’re a self-employed consultant, you need to drive to meet with clients or attend meetings. If driving is part of your business, then a business vehicle is something to consider. Here are the basics of buying, financing and insuring a business vehicle.

When should you buy a business vehicle?

You may be able to use your current car or truck for business needs and avoid the expense of a new vehicle. Using your personal vehicle for business purposes can be very beneficial when tax season rolls around. Mileage, maintenance costs, parking tolls and car loan payments are all tax-deductible expenses that can save you and your business money. However, there are also tax advantages to purchasing a vehicle for business use. It’s important to research the tax implications of claiming vehicles for small businesses before you make your decision, and always be sure to discuss with a professional tax advisor.

There are other benefits of having a business vehicle that are not tax related. You can insure your vehicles through your business, protecting your personal insurance from going up by adding another driver or other rate hikes. Also, depending on your business, the vehicle you use can influence your customers’ perception of you. For example:

  • If you’re a consultant for green building projects, pulling up to the worksite in a fuel-efficient hybrid car reinforces your commitment to the environment.
  • If you’re a roofing contractor, your parked vehicles are billboards showcasing your work while you’re on location.
  • If you regularly transport clients as a part of your business, your vehicle is like a second office and should make a good impression.

What kind of vehicle do you need?

When purchasing a vehicle for your business, the first consideration should be its planned use. Think about how often you will drive the vehicle, the total mileage you plan to use, on what terrain or types of weather, and how many people will need to ride in the vehicle on a regular basis.

Consider purchasing potential vehicle types like a panel van, delivery truck, pickup truck, car, van or even an RV. Remember that vehicles such as forklifts and dump trucks are not considered business vehicles, but equipment. There may be tax implications associated with some vehicle types, including special depreciation allowances for certain pickup trucks and vans or tax breaks for electric vehicles, so it’s a good idea to talk to your tax advisor before you make a purchase.

Considerations for buying a business vehicle

Finally, you’ll want to consider whether you should buy a new or used vehicle. Again, you’ll need to consider how you plan to use it. Some large trucks and vans can be very costly to buy new, so a used vehicle may be an attractive option. However, there may be dealer incentives or warranties associated with new vehicles, so consider those as well. If you do choose to buy used, take the same steps you would when buying a used vehicle for personal use.

When you are ready to start shopping, look for manufacturer’s incentives, especially for business buyers, such as cash back, rebates or fleet discounts. While incentives can provide great deals, make sure you aren’t swayed from choosing a vehicle that is right for your vehicle’s purpose. Before you go to the dealer, secure your financing, making sure to work with a financial institution that provides loans especially for businesses. Navy Federal Credit Union offers both business and commercial vehicle loans for small-business clients. And, when you're approved for a used business vehicle loan through Navy Federal, we'll review the CARFAX® Vehicle History Report™ so you can buy with confidence.

It’s also important to protect your investment with the right insurance. Personal policies don’t have the same protections offered by business policies, so it’s important to insure business vehicles separately. You can also protect your personal insurance rates by keeping these accounts separate. There are three types of policies that cover most vehicle usage: business use by you, business use for multiple drivers and commercial traveling policies. Talk to your insurance advisor about which coverage is right for you.

The main things to remember when purchasing a vehicle for your business are to prioritize the right kind of vehicle for your purpose and talk to your tax and insurance partners throughout the process. And when you’re ready, keep your business moving with a business or commercial loan from Navy Federal.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.